Obama administration faces business backlash over home aide pay rule

The Obama administration’s move to extend minimum wage and overtime pay to nearly 2 million in-home health aides is facing a backlash from businesses.

Industry groups say the new standards would stunt explosive growth in the home health sector, with increased costs likely to be passed along to consumers.

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“These new regulations will drastically change the home care industry to the detriment of small businesses, patient comfort, and worker wages,” said Susan Eckerly, senior vice president for federal public policy at the National Federation of Independent Business (NFIB).

A final Labor Department rule, announced Tuesday, is set to take effect in 2015, more than a decade after unions and worker advocates began pushing for changes to the Fair Labor Standards Act (FLSA).

An estimated 1.9 million domestic aides and assistant nurses are currently denied minimum wage and overtime rights under the 1974 law’s “companionship exemption.”

Proponents of the new regulations argue that the healthcare industry has evolved, allowing greater numbers of the elderly and infirm to remain in their homes under the care of health professionals. Those aides, President Obama charged two years ago, should not be, “lumped in the same category as teenage babysitters, when it comes to how much they make.”

First proposed in 2011, the law has come under criticism from private sector groups, who warned during meeting at the White House of potential upheaval in the industry. Their concerns have not been allayed.

Critics say employers within the industry, unable to afford overtime pay, would be forced to limit worker hours. Aides would have to take on multiple jobs and patients would see disruptions in their care.

“By ending the companionship exemption, DOL has effectively mandated home care providers work in shorter shifts with reduced hours,” Eckerly said. “At the same time, those who rely on these services can expect less personal care coupled with significantly rising prices.”

“We’ve heard these concerns since the beginning of the process, but industry has yet to prove them,” said Cathy Ruckelshaus, legal co-director for the National Employment Law Project

The number of firms that provide in-home care and services for the elderly and disabled steadily increased between 2001 and 2010, while many industries struggled to survive amid a crushing recession, they note.

During that time, the number of home care services more than doubled and now totals 80,000 firms comprising an $84 billion industry, according to the Paraprofessional Healthcare Institute (PHI).

Meanwhile, Ruckelshaus said, many firms that charge heir clients $18 or $19 an hour, pay the aide only $8 or $9.

“So there’s a cushion there,” she said, “It’s a very profitable industry.”

But opponents said Medicaid reimbursement payments to in-home care providers are structured under the current rules, but argued that an increase in the cost of doing business is not likely to be accompanied by Medicaid adjustments.

At the same time, demand is expected to rise as baby boomers age. One in ten clients of home care services require 24-hour live-in service and one of four needs care for more than 40 hours a week, according to Steve Caldeira, president of the International Franchise Association.

He said the action would force caregivers into an unregulated “underground” market.

“Eliminating the long-standing overtime companion care exemption for hundreds of thousands of workers will significantly raise the cost of care for seniors while simultaneously stifling a growing sector of the economy responsible for creating thousands of new jobs,” Caldeira said.